ADMS 2500 Chapter Notes - Chapter 4: Accrual, Deferred Income, Deferral

The trial balance of S&S Tree Service as of January 1, 2016had the following normal balances: Cash $ 20,000 AccountsReceivable 2,800 Supplies 425 Prepaid Insurance 3,000 EquipmentAccumulated Depreciation Accounts Payable 900 Salaries Payable 500Interest Payable Unearned Revenue 225 Note payable Common Stock22,000 Retained Earnings 2,600 Dividends Service Revenue FuelExpense Depreciation Expense Insurance Expense Interest ExpenseRent Expense Salary Expense Supplies Expense S&S Tree Servicecompleted the following transactions during 2016. 1. Paid thesalaries owed from the prior period. 2. The company purchasedequipment for $25,000 making a down payment of $1,000 and taking aloan on the remainder at a 4% annual interest rate. 3. Issued stock$3,000. 4. Paid $900 cash for supplies. 5. Prepaid insurance of$900 for a three month period. 6. Performed tree trimming servicesfor a customer and received $2,800 cash. 7. Completed a largecommercial job and billed the customer $36,500. 8. Paid the amountdue on account. 9. Purchased supplies on account $2,500. 10.Collected $675 in advance for lawn service to be performed later.11. Collected $15,800 cash from customer on account. 12. Purchasedfuel for the truck, paying $1,200 on account. 13. Paid employees,$700. 14. Paid office rent for the period, $3,600. 15. Paid $500 individends to the stockholders. Adjustments: 16. There was $500supplies on hand at year end. 17. Prepaid insurance used during theyear was $300 “per month”. 18. Unearned services earned during theyear $400. 19. Accrue interest on the note payable for one fullyear. 20. Accrue salaries for year end, $300. 21. Depreciation forthe year was $5,000. Required: a. Record the above transactions(#1-15) and the adjustments (#16-21) in the general journal. (Youare to create a general journal page in Excel and number eachtransaction you record; ie 1,2,3 etc.) b. Post the entries toT-Accounts. i. Use a new TAB in EXCEL to create the T-Accounts.(Hint: the CASH will have the most postings) ii. Line up theT-Accounts in organized columns, under each of the followingcategories; (Assets, Liabilities, Equity, Revenues, Expenses) iii.After posting, subtotal each T-Account to show the balance in theaccount. c. Prepare a Trial balance. Please use a separate tab inExcel for this step. d. Prepare the financial statements for 2016and include complete and proper headings on each. (IncomeStatement, Statement of Changes in Stockholders Equity, BalanceSheet. Can i please get someone to just answer question D for meplease?

1. Using accrual accounting, revenues are recorded

a. when cash is received without regard to when the services are performed or products have been delivered to customers.

b. when a service has been performed or products have been delivered to customers without regard to when cash is received.

c. when cash is received at the time services are performed or products have been delivered to customers only if cash is received.

d.after the services are performed or products have been delivered to customers.

2. Deferred revenue is revenue that is

a. earned and the cash has been received.

b. earned but the cash has not been received.

c. not earned and the cash has not been received.

d. not earned but the cash has been received.

3. Adjusting entries always include

a. only income statement accounts.

b. only balance sheet accounts the cash account.

c. at least one income statement account and one balance sheet account.

4. Which of the following is considered to be an accrued expense?

a. a computer technician has installed the latest software updates and was paid on the same day

b. a computer technician has been paid in advance to install software updates as they become available

c. a computer technician has just signed an agreement with you regarding pricing for future work

d. a computer technician has installed the latest software updates, but you have not received an invoice or made payment

1. Which of the following identifies the proper order of theaccounting cycle?

A. Analyze, Journalize, Unadjusted Trial Balance

B. Analyze, Post, Unadjusted Trial Balance

C. Journalize, Post, Adjusted Trial Balance

D. Unadjusted Trial Balance, Adjusted Trial Balance, Close

E. Adjusted Trial Balance, Adjustments, Financial Statements

2. Interim financial statements refer to financial reports:

A. That cover less than one year, usually spanning one, three orsix-month periods

B. That are prepared before any adjustments have beenrecorded

C. That show the assets above the liabilities and theliabilities above the equity

D. Where revenues are reported on the income statement when cashis received and expenses are reported when cash is paid

E. Where the adjustment process is used to assign revenues tothe periods in which they are earned and to match expenses withrevenues

3. The accounting principle that requires revenue to be reportedwhen earned is the:

A. Matching principle

B. Revenue recognition principle

C. Time period principle

D. Accrual reporting principle

E. Going-concern principle

4. Adjusting entries:

A. Affect only income statement accounts

B. Affect only balance sheet accounts

C. Affect both income statement and balance sheet accounts

D. Affect only cash flow statement accounts

E. Affect only equity accounts

5. The system of preparing financial statements based onrecognizing revenues when the cash is received and reportingexpenses when the cash is paid is called:

A. Accrual basis accounting

B. Operating cycle accounting

C. Cash basis accounting

D. Revenue recognition accounting

E. Current basis accounting

6. If throughout an accounting period the fees for legalservices paid in advance by clients are recorded in an accountcalled Unearned Legal Fees, the end-of-period adjusting entry torecord the portion of those fees that has been earned is:

A. Debit Cash and credit Legal Fees Earned

B. Debit Cash and credit Unearned Legal Fees

C. Debit Unearned Legal Fees and credit Legal Fees Earned

D. Debit Legal Fees Earned and credit Unearned Legal Fees

E. Debit Unearned Legal Fees and credit Accounts Receivable

7. A company had no office supplies available at the beginningof the year. During the year, the company purchased $250 worth ofoffice supplies. On December 31, $75 worth of office suppliesremained. How much should the company report as office suppliesexpense for the year? A. $75 B. $125 C. $175 D. $250 E. $325 8. OnJanuary 1 a company purchased a five-year insurance policy for$1,800 with coverage starting immediately. If the purchase wasrecorded in the Prepaid Insurance account and the company recordsadjustments only at year-end, the adjusting entry at the end of thefirst year is:

A. Debit Prepaid Insurance, $1,800; credit Cash, $1,800

B. Debit Prepaid Insurance, $1,440; credit Insurance Expense,$1,440

C. Debit Prepaid Insurance, $360; credit Insurance Expense,$360

D. Debit Insurance Expense, $360; credit Prepaid Insurance,$360

E. Debit Insurance Expense, $360; credit Prepaid Insurance,$1,440

9. Unearned revenue is reported on the financial statementsas:

A. A revenue on the balance sheet

B. A liability on the balance sheet

C. An unearned revenue on the income statement

D. An asset on the balance sheet

E. An operating activity on the statement of cash flows

10. Which of the following assets is not depreciated?

A. Store fixtures

B. Computers

C. Land

D. Buildings

E. Vehicles

11. On April 30, 2011, a three-year insurance policy waspurchased for $18,000 with coverage to begin immediately. What isthe amount of insurance expense that would appear on the company'sincome statement for the year ended December 31, 2011? A. $500 B.$4,000 C. $6,000 D. $14,000 E. $18,000 12. Expenses incurred butunpaid that are recorded during the adjusting process with a debitto an expense and a credit to a liability are:

A. Intangible expenses

B. Prepaid expenses

C. Unearned expenses

D. Net expenses

E. Accrued expenses

13 The difference between the cost of an asset and theaccumulated depreciation for that asset is called

A. Depreciation Expense

B. Unearned Depreciation

C. Prepaid Depreciation

D. Depreciation Value

E. Book Value

14. A company purchased a new truck at a cost of $42,000 on July1, 2011. The truck is estimated to have a useful life of 6 yearsand a salvage value of $3,000. How much depreciation expense willbe recorded for the truck for the year ended December 31, 2011?

A. $3,250

B. $3,500

C. $4,000

D. $6,500

E. $7,000

15. A company's Office Supplies account shows a beginningbalance of $600 and an ending balance of $400. If office suppliesexpense for the year is $3,100, what amount of office supplies waspurchased during the period?

A. $2,700

B. $2,900

C. $3,300

D. $3,500

E. $3,700